**************************************************************************** TWO CENTS WORTH FINANCIAL PLANNING NEWSLETTER ISSN 1488-397X FEB. 16, 2001 BY DOUG HUDSON, MBA,CD **************************************************************************** You have received this newsletter because at one point in time you subscribed to it. If you no longer wish to receive the newsletter please un-subscribe here: http://www.rrsp.org/newslet.htm RRSP.ORG in the media: NATIONAL POST: http://www.rrsp.org/redir/np021001.htm Need an advisor? Try here: http://www.rrsp.org/advisors/index.htm **************************************************************************** In this Issue - BALANCED FUNDS Greed, Fear and Balanced Funds. Greed and fear, these are the two forces that explain 90% of what happens in the marketplace. They are powerful emotions. Fear is the greater emotion of the two. How do I know this? It's simple. Look at a graph of any equity index and you will see gentle slopes leading upwards towards the top and sharp cliffs dropping downwards. The gentle slopes are greed lines and the shear cliffs are fear lines. At the bottom of these cliffs are valleys and flat plains. That's where we are today. It's a great time to invest. The only problem is that fear is the greater emotion, and it is this fear that is keeping many people who normally invest in RRSP's on the sidelines for the moment. Nobody knows where to put their money. For people in the industry, it's been a very slow RRSP season. For investors who have been making regular contributions to their RRSP this isn't a concern. For others who decide once a year at the last minute it's a major issue. We all know that equities perform better over the long term, yet at the same time, nobody wants a repeat of the last six months performance. If you are one of those investors who is still sitting on the fence let me make a suggestion - balanced funds. A balanced fund is a mutual fund that invests in both equities and income-bearing securities. Balanced funds are designed to produce a mix of both capital gains and income, with less variability than equity funds normally exhibit. There are many examples of Canadian balanced funds that have outperformed the TSE index proving that you don't have to take on extra risk to get a decent return. Just for the fun of it, use one of the services on the web that will allow you to graph funds against an index and look at the performance of the Clarington Balanced fund compared to the TSE 300 composite index for the three and one-year periods. Then look at it over the last six months. While the TSE has dropped almost 20%, this fund is up 2%. Two percent doesn't sound like much, but that's 22% better than the TSE! Take the Trimark (AIM) Income Growth fund. Remember how everyone loved bashing Trimark? Well this balanced fund is bashing back with a six-month return of 13.23%. I am not recommending specific funds, but rather using them as examples of funds in this asset class that will allow you to earn a decent return and sleep comfortably at night. If you aren't sure where to put your RRSP money this year, take a few moments to check out some of the excellent funds in this class. ************************************************************************** NEXT ISSUE: RRSP INFORMATION THAT YOU NEED TO KNOW ************************************************************************** ADVERTISORS: To advertise in this newsletter or at http://www.rrsp.org/ contact Doug Hudson here: doughudson@rrsp.org ************************************************************************** DISCLAIMER: Nothing in this newsletter should be misconstrued as an offer to sell mutual funds. Mutual funds and other investments should be purchased through a qualified represenative in your provice, licensed to sell these securities, and only after you have read the prospectus. Note that past performance is no guarantee of future performance.